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Feetham targeting year-end for Gibraltar’s “dual captive” regime

Gibraltar’s new Minister for Financial Services, Nigel Feetham, wants the legislation for a new dual captive regime to be passed this year, and believes the territory could provide an attractive proposition to prospective captive owners.

Feetham has been appointed Minister for Financial Services after being elected to parliament on 12 October.

Speaking in an exclusive interview with Captive Intelligence at Gibraltar’s Insurance Breakfast on 24 October, Feetham said while Brexit had presented “a major challenge” for the territory’s financial services sector, being outside of the European Union now gave “Gibraltar an opportunity to create specific legislation and regimes in the financial services sector that deviate from EU law”.

Feetham is pursuing a “dual captive regime” that would essentially differentiate between captives that are writing UK business or not.

Prior to Brexit, Gibraltar-domiciled insurers, including captives, could write direct insurance across the EU and into the United Kingdom but they had to follow Solvency II regulations.

Now outside of the EU, Gibraltar has lost its access to write direct across the EU but could implement its own solvency regime.

Insurers in the territory can still write into the UK and it is a major hub for UK auto insurers, and has a growing pet and travel insurance sector.

Dual captive regime

Captive Intelligence understands legislation for the proposed dual regime is currently being drafted and Feetham is hopeful of getting it finalised and passed before year-end.

While drafting continues and details need to be finalised, the dual regime Feetham is pursuing would mean any captive insurer that is writing UK business would have to respect the Gibraltar Authorisation Regime (GAR), meaning it would have Solvency II (soon to be Solvency UK) applied.

A Gibraltar captive that is not writing UK business or seeking UK market access, could be regulated under a “onerous” solvency regime.

“Through our dialogue and discussions with the UK government, we’ve agreed it is open to Gibraltar to have a captive regime that removes the onerous requirements of Solvency II, albeit as a result of the fact that it is captive business and therefore it’s self-insurance and to the extent that there are no consumers involved the risks are much lower,” Feetham explained.

“I’m pleased to say that we’ve had initial discussions with the Gibraltar regulator and I set out my vision for the financial services sector. I explained to the regulator that it’s His Majesty’s Government of Gibraltar’s policy priority to see the implementation of that legislation in Gibraltar as soon as possible.”

Captive prospects

Although Gibraltar is already home to a handful of captives, including Tate & Lyle Insurance (Gibraltar) Limited, owned by Tate & Lyle PLC, and Diramic Insurance Limited, owned by OMV Group, Feetham conceded its previous attempt at becoming an established captive domicile at the turn of the century did not take off.

There are also protected cell companies (PCCs) in the jurisdiction, including White Rock Insurance (Gibraltar) PCC Limited owned by Aon, while it has become a major hub for open market insurers that want to access the UK.

“Gibraltar is a centre of excellence in insurance,” Feetham added.

“Thirty per cent of all motor insurance business underwritten in the UK is underwritten by Gibraltar companies, 20% of all pet insurance and indeed 30% of all travel intermediated business is now underwritten from Gibraltar.

“We certainly have the track record to grow in insurance and with the energy and drive that I know Gibraltar can bring to the table, I’m absolutely certain that it will be a catalyst for the sort of growth that I want to see in the captive sector.”

Gibraltar-based John Harris, group business development director at Robus Group, told Captive Intelligence he looked forward to seeing the draft legislation but felt the likely capital requirements would lend the regulatory environment to being suitable for mid to large organisations.

“Establishing the dual captive regime in Gibraltar will undoubtedly add choice to potential captive owners and should demonstrate Gibraltar’s ability to innovate and strengthen its reputation as a leading insurance jurisdiction,” Harris said.

“Potential buyers would benefit from insurance legislation based on common law, and should benefit from capital requirements which I understand will be significantly less onerous than those required by Solvency II jurisdictions. This should open up opportunities to a wider audience of potential captive candidates.”